State and Federal Health Reform

1
State and Federal Health Reform

• Joshua Goldberg
• National Association of Insurance Commissioners
• ACODESE 2008 Convention
• June 7, 2008
• Rio Mar Beach Resort, Puerto Rico

2
Overview

• Catalysts
• Prospects
• State Reform
• Elements of State Reform Initiatives
• State Reform Plans
• Federal Reform
• Elements of Federal Reform Initiatives
• Health Reform Bills

3
Health Insurance Reform

• For over 20 years policymakers have been actively
  debating health care reform
• In the meantime
• Health care spending increases
• Premiums rise
• The number of uninsured grows
• Quality of care falls
• The most important issues health care costs and
  utilization - remain an afterthought!
• Is the time ripe for reform?

4
Catalysts for Reform 2008

• Large companies are now straining under health
  care costs
• International competitiveness said to be at stake
• Cost-shifting to individuals is creating unease
  among the insured
• Major issue in Presidential politics
• 2 domestic issue behind the economy

5
Health Insurance Premiums Outpacing Wages
91
Percent change
24
Notes Data on premium increases reflect the cost
of health insurance premiums for a family of
four/the average premium increase is weighted by
covered workers. 2006 and 2007 private
insurance administration and personal health care
spending growth rates are projections. Sources
A. Catlin, C. Cowan, S. Heffler et al., National
Health Spending in 2005 The Slowdown Continues,
Health Affairs, Jan./Feb. 2007 26(1)14353 J.
A. Poisal, C. Truffer, S. Smith et al., Health
Spending Projections Through 2016 Modest Changes
Obscure Part Ds Impact, Health Affairs Web
Exclusive (Feb. 21, 2007)w242w253 Henry J.
Kaiser Family Foundation/Health Research and
Educational Trust, Employer Health Benefits
Annual Surveys, 20002007 (Washington, D.C.
KFF/HRET).
6
47 Million Uninsured in 2006
Number of uninsured, in millions
2013
19992006 estimates reflect the results of
follow-up verification questions and
implementation of Census 2000-based population
controls. Note Projected estimates for 20072013
are for nonelderly uninsured based on T. Gilmer
and R. Kronick, Its the Premiums, Stupid
Projections of the Uninsured Through 2013,
Health Affairs Web Exclusive, April 5, 2005.
Source U.S. Census Bureau, March Current
Population Survey, 19882007.
7
Uninsurance by Income, 2004
Percent of working adults who are uninsured
In 1999, CPS added a follow-up verification
question for health coverage.
Source Analysis of the March 19882004 Current
Population Surveys by D. Ferry, Columbia
University, for The Commonwealth Fund.
8
Is the Time Ripe for Reform?

• 2008 - Major action in is unlikely
• Legislation will be limited
• Genetic Information Nondiscrimination Act
  (GINA)--Enacted
• Medicare bill (Next 2 weeks)
• Mental Health Parity
• The year will largely be used to stake out
  positions and education
• 2009 - Year for action?
• Outcome of Presidential and Congressional
  Elections
• Desire of policymakers to reach compromise
• State of the economy
• Level of worry among the currently insured

9
State Health Reforms

• States have been waiting since early 90s for the
  federal government to address health reform
• In the last 5 years, some have grown tired of
  waiting for federal action.
• The current wave of state reforms has attempted
  to comprehensively address the health system

10
Comprehensive Reform

• Access
• Safety net expansions
• Subsidized private plans
• Purchasing mechanisms
• Market reforms
• Cost containment
• Pay for performance
• Cost transparency
• Wellness promotion
• Mandated Benefits
• Quality of care
• Chronic care/Disease management
• Quality measurement
• Evidence-based medicine
• Health IT

11
States Undertaking Reform

• Maine - 2003
• Vermont - 2006
• Massachusetts - 2006
• California - Considered rejected in 2007

12
Maine - Dirigo Health

• Enacted 2003
• Goal of expanding coverage to all Mainers by 2009
• Emphasis on cost containment and quality
  improvement

13
Access

• Dirigo Choice
• Voluntary coverage offered through a contract
  with private insurer to small businesses,
  individuals, self-employed
• Employers must cover 60 of premium
• Individuals share of premiums subsidized by
  state for those below 300 FPL (52,800 for a
  family of 3)
• MaineCare (Medicaid) expansion
• 125 FPL for individuals, 200 for adults with
  eligible children

14
Cost Containment

• Hospital Finance Study Commission
• Biennial State Health Plans
• One-year voluntary caps on cost and operating
  margins of insurers, hospitals, and providers.
• Capital investment budgeting
• One-year moratorium on certificates of need
• Expansion of certificates of need to cover
  ambulatory surgery centers and physician offices
  for technologies over 1.2 million and capital
  expenditures over 2.4 million
• Small group rate review, increased oversight of
  large group market

15
Quality Improvement

• Maine Quality Forum
• Promote evidence-based medicine and best
  practices
• Encourage adoption of health information
  technology
• Collect and disseminate research
• Adopt quality and performance measures
• Issue quality reports

16
Financing

• Premiums from businesses and individuals.
• Federal funds through Medicaid expansion.
• General revenues for initial funding
• 52 million for DirigoHealth
• 1 million for Maine Quality Forum
• Savings Offset Payments
• Assessments on insurers, TPAs, reinsurers.
• Recaptures savings from cost-containment
  provisions, reductions in bad debt and charity
  care.
• Funds low income subsidies for DirigoChoice and
  Maine Quality Forum
• 2006 43.7 million
• 2007 34.3 million

17
Results to Date

• Disappointing Enrollment
• 30,000 projected enrollment in first year (2005)
• 11,000 actually enrolled in September 2006
• Over half of 1st year enrollees had prior
  coverage
• 15,000 enrolled over life of program
• 30 small employers
• 28 sole proprietors
• 42 individuals
• Premiums for employers not much lower than
  private market
• Main attraction is the subsidy for employees

18
Dirigo 2.0 Proposal (Not Adopted)

• Individual Mandate/ Employer Assessment
• Reduction of Employer Minimum Contribution
• Allow multiple carriers to offer DirigoChoice
  product
• Allow carriers greater negotiating authority with
  providers
• Reinsurance program in individual market
• Rating rule adjustments

19
Vermont - Catamount Health Care Reform

• Adopted 2006
• Result of 1 year of debate between Republican
  governor and Democratic legislature
• Based upon management and containment of chronic
  care costs
• 61,000 uninsured Vermonters (9.8)
• Expected to cover 25,000
• Additional expansions to be considered by January
  2009

20
Catamount Health

• Separate, voluntary insurance pool offered by
  private carriers
• Open to uninsured individuals who meet
  qualifications
• Comprehensive PPO plan
• 250 deductible/800 OOP maximum
• Provider reimbursement rates 10 above Medicaid,
  but below private market
• Enrollment opened Oct. 1, 2007

21
Premium Assistance

• Low income individuals pay reduced premiums
• If cost-effective, Medicaid enrollees will be
  required to enroll in employer-sponsored
  coverage, if offered, with premium assistance and
  wrap-around benefits

22
Employer Assessment

• Employers will pay assessments based upon three
  groups of employees
• All employees of employers who do not offer
  insurance to anyone
• Non-eligible employees of employers that offer
  coverage
• Employees who choose not to enroll and are
  uninsured
• Assessment for 2007 2008 excludes first 8
  employees
• Assessment will be 365 per employee and will be
  indexed to Catamount Health premiums

23
Insurance Reforms

• Healthy Lifestyle Insurance Discount
• Small group and nongroup carriers may establish
  rewards, premium discounts, rebates, or
  reductions in cost-sharing requirements
• Up to 15 of the premium
• Nongroup Market Security Trust
• Insurers may transfer 5 of claims to the trust
• Trust to be funded in part by federal grants,
  including those available under the Trade
  Adjustment Act
• Nongroup premiums must reflect reduced claims
  costs attributable to trust

24
Simplified Administration

• Simplified claims processes
• Creates a commission to recommend ways to
  simplify and reduce administrative costs
  associated with
• Claims forms
• Patient invoices
• Explanation Of Benefits forms
• Payment codes
• Claims submission processing procedures
• Electronic claims processing
• Prior authorization process
• Uniform provider credentialing
• Common application form and timelines

25
Chronic Care Costs

• Chronic care accounts for 70 of the states
  health care costs
• More than half of all Vermont adults have at
  least one chronic condition
• People with chronic conditions receive the right
  care at the right time only 55 of the time

26
Chronic Care Management

• Medicaid Chronic Care Management Program (CCMP)
• Health risk assessments
• Early and coordinated screening
• Education
• Health coaching
• Medicaid reimbursement incentives for providers
  participating in CCMP

27
Blueprint for Health

• Patient Self-management
• Patient actively manages and is responsible for
  his or her own care in collaboration with a
  health care team
• Evidence-Based Medicine
• Promotion of evidence-based medicine and
  alignment of financial incentives
• Community Support for Wellness
• Communities act to encourage healthy lifestyles
• Health Information Technology
• Development of web-based electronic health
  records and other tools for individual and
  population based care management
• Health System Design
• Development of common performance measures and
  clinical guidelines
• Alignment of financing mechanisms with treatment
  goals

28
Future Expansion

• If reform achieves less than 96 coverage, the
  legislature must consider individual mandate

29
Massachusetts

• 370,000 uninsured (6 of population)
• Probably a low estimate
• 750 million Uncompensated Care Pool
• External pressure for reform from federal
  government
• Nearly identical regulations in small group and
  nongroup markets
• Reform Law Enacted 2006
• Compromise between Gov. Mitt Romney and
  Democratic legislature

30
Pre-Reform Market Rules

• Small Group (1-50)
• Guaranteed Issue
• 21 Rate Band
• Nongroup
• Guaranteed Issue
• 21 Rate Band

31
Health Reform Legislation

• Commonwealth Connector
• Individual mandate
• Employer responsibilities
• Market reforms
• State responsibilities

32
Commonwealth Connector
Non-Offered Individuals
Non-Working Individuals
Small Businesses
Sole Proprietors
Commonwealth Connector
BCBS
Harvard Pilgrim
Tufts
Fallon
NHP
New Entrants
MMCOs
33
Commonwealth Connector

• Connect uninsured with coverage
• Aggregates contributions from employers
  (including multiple employers), individuals and
  forwards to insurers
• Administers Commonwealth Care program
• Connects eligible residents earning below 300
  FPL with subsidized coverage
• Offer mandate-lite plans for 19-26 year olds

34
Individual Mandate

• All state residents over 18 must have health
  insurance coverage
• Coverage must meet minimum standards
• 2007-2008
• Any plan sold in Massachusetts
• 2009 onward
• Max. deductible 2,000/4,000
• Max. out of pocket 5,000/10,000
• First dollar preventive care
• No daily cap on hospital benefits
• 250 Rx deductible
• Mandate enforced through tax code

35
Unless

• Insurance deemed not affordable
• Not greater than a set percentage of income
• Religious objection
• Advance waiver stating that no health insurance
  product was affordable

36
Penalties

• 2007
• Must have coverage by 12/31/2007
• Loss of personal deduction on state income tax
  (219 for individual filer)
• 2008 onward
• Fine of up to 50 of least costly plan available
  for each month not covered
• 63 day coverage gap allowed

37
Market Reforms

• Merges small group and nongroup markets
• 21 rating band
• Small group size adjustment allowed outside band
• Rates vary with age, industry, participation
  rate, tobacco/wellness
• Dependents covered to age 26 or 2 years past tax
  dependency status
• Coverage must be offered to all full time
  employees at same premium for high salary and low
  salary employees

38
Employer Responsibilities

• Fair Share Assessment
• Employers with gt10 employees must either offer
  plan with 25 take up or contribute 1/3 of
  premium
• Those that fail to do so pay annual assessment of
  295 per employee
• Section 125 Plan
• Employers with gt10 employees must offer Sec. 125
  plan to all employees.
• Those that fail to do so can be subject to Free
  Rider Surcharge

39
State Responsibilities

• Commonwealth Connector
• Quality and Cost Council
• Safety Net Expansion

40
Massachusetts Progress

• 340,000 newly covered since reform
• MassHealth (Medicaid) - 57,800
• CommonwealthCare (Free) - 125,800
• CommonwealthCare (Contributory) - 47,600
• Employer-Sponsored Insurance - 85,000
• Nongroup Insurance - 21,280
• Small group-individual merger is encouraging
• Premiums for individuals are approximately 1/2 of
  what they were prior to reform and policies are
  more comprehensive.

41
Open Questions

• Will individual mandate be effective?
• Will exemptions undermine the mandate?
• Will penalty provide sufficient incentive?
• Will it be scaled back?
• Will affordable plans be available?
• New minimum standards take effect in 2009
• Will employer mandate be effective?
• Is there adequate funding?

42
California

• Gov. Schwarzenegger proposed a health reform plan
  in January 2007
• Governor vetoed legislative plan
• Compromise legislation passed Assembly, but died
  in Senate committee due to cost concerns.

43
Context

• 6.6 million uninsured residents (20.8)
• 31 of uninsured earn more than 50,000
• 45 of non-citizen residents are uninsured
• 101 variation in small group premiums
• No nongroup market rating structure

44
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45
Pay-or-Play

• Sliding scale pay-or-play system

46
Safety Net Expansions

• Healthy Families Program (SCHIP)
• Children in families
  133-300 FPL
• Parents and 19-20 year-olds 100-250
  FPL
• Medi-Cal (Medicaid)
• Single, medically indigent adults lt 250
  FPL
• 19-20 year-olds lt
  100 FPL
• New Program for Childless Adults
• Childless Adults lt
  100 FPL
• Slightly lower coverage than subsidized Cal-CHIPP

47
California Cooperative Health Insurance
Purchasing Program (Cal-CHIPP)

• Operated by MRMIB (High Risk Pool Board)
• Coverage provided by private insurers
• 2 Enrollment Categories
• Cal-CHIPP Healthy Families Program (Uninsured
  adults between 100-250FPL, whose employers do
  not contribute to coverage)
• Non-CCHFP (Employer does not provide coverage or
  income between 250-400 FPL and premium exceeds
  5.5 of income)

48
CCHFP Cal-CHIPP Healthy Families Plan

• Includes all required benefits, plus prescription
  drugs
• Individuals below 150 FPL
• No premiums, no cost sharing
• Individuals between 150-250 FPL
• Premiums not to exceed 5 of income

49
Cal-CHIPP

• Will offer at least 3 different coverage options
• Minimum coverage to satisfy individual mandate
• Mid-range plan
• High- end plan
• Enrollees pay full premium
• Enrollees whose employers pay into fund will
  receive discount of 20 of the cost of the
  minimum coverage plan
• Tax credit for enrollees between 250-400 FPL if
  premium exceeds 5.5 of income

50
Guarantee Issue

• Requires all individual market plans to be
  guarantee issue by 2010
• Exceptions
• Those exempted from individual mandate
• New residents
• Those who have not complied with individual
  mandate for 62 days

51
Financing

• Federal matching funds for Medicaid and SCHIP
  expansions
• Redirect tobacco tax revenues from high risk pool
• Employer pay-or-play assessments
• 4 tax on hospital patient revenues

52
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53
Individual Mandate

• All Californians and dependents must have minimum
  coverage (to be determined by regulation)
• Existing coverage grandfathered
• Penalty to be determined by MRMIB
• Auto enrollment at point of service
• Exemptions
• Premium above 5 above family income for those
  below 250 FPL
• CA Resident less than 6 months
• Minimum coverage determined to be an undue
  hardship

54
Rating Reforms

• Modified Community Rating
• Age
• Geography
• 4-year phase out of health status in individual
  market
• 85 minimum loss ratio
• Reinsurance program if Cal-CHIPP selects against
  private market by more than 5

55
Individual Market Tiering

• CDI and DMHC to categorize health plans into 5
  coverage choice categories
• Lowest level Minimum creditable coverage
• Carriers must offer at coverage in all 5
  categories, including a standard product in each
• Enrollee may only increase coverage by 1 level
  each year unless they have a qualifying event
  (marriage, birth of child, divorce, etc.)

56
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57
Pay-for-Performance

• Up to 25 of Medicaid reimbursement increase may
  be reserved for incentives linked to performance
  measures and improvement
• State will consult with stakeholders in
  developing performance measures

58
Medi-Cal Diabetes Management

• Diabetes management program for Medicaid
  enrollees diagnosed with prediabetes or diabetes
• Provides
• Lifestyle coaching
• Self-management training
• Regular laboratory evaluations
• Financial participation incentives for enrollees
  and providers

59
Cost and Quality Transparency

• Cost and Quality Transparency Committee
• Data collection and dissemination of provider
  cost, quality, and outcomes
• Angioplasty Effectiveness Study
• Publish risk-adjusted hospital and physician
  outcome reports on the use of angioplasty and
  stents

60
Wellness Promotion

• Obesity Prevention
• Dept. of Public Health to develop obesity
  prevention campaign
• Campaign linked to local efforts
• Technical assistance to employers implementing
  wellness programs and policies
• Smoking Cessation
• Dept. of Public Health to publicize efforts of 10
  largest insurers
• Local Community Makeover Grants to promote
  active living and healthy eating

61
California Why it died

• Uncertainty surrounding employer requirements and
  individual mandate effectiveness
• - PLUS -
• 14 billion state budget deficit
• 14.4 billion cost estimate for reform

62
Federal Reform

• Many ideas circulating on health reform
• State flexibility
• Insurance connectors (exchanges)
• Individual mandates
• Employer mandates
• Purchasing pools
• Reinsurance
• Many reform plans are taking shape, particularly
  in the Senate

63
State FlexibilityHealth Partnership Through
Creative Federalism Act (H.R. 506, S. 325)

• States submit comprehensive reform plan to a
  board for consideration
• Plans must be budget-neutral over a 5-year period
  as far as federal funds are concerned
• Could contain elements that conflict with current
  federal law and regulations
• Board would forward approved plans to Congress
  for fast-track consideration
• Plans passed by Congress and signed by the
  president would receive funding and flexibility

64
Insurance ConnectorHealthy Americans Act (S.
334)

• Phases out employer-sponsored insurance
• Requires states to create health insurance
  exchanges for residents to purchase individual
  coverage
• Guaranteed-issue/community rating
• Individual mandate to purchase Healthy Americans
  Private Insurance (HAPI) Plan
• Low income subsidy
• Employer assessment

65
Small Group CoverageSmall Business Health
Options Program Act (S. 2795)

• Eliminates the use of health status in setting
  premiums in the small group market
• Provides tax credits to employers purchasing
  coverage through SHOP and paying part of the
  premium.
• National SHOP plans with a single set of benefits
  will be offered using national rating rules.
• All changes are phased-in over 4 years.

66
Tax TreatmentBush Administration Proposal

• 2007 State of the Union Address
• Eliminates the exclusion of employers health
  insurance contributions from taxable income
• Provides standard deduction for health insurance
  of 7500 individual/ 15000 family
• Gives states money to expand or establish high
  risk pools
• Conditioned upon reducing benefit or premium
  mandates

67
Free-Market ApproachComprehensive HealthCARE
Act of 2007 (H.R. 2626)

• Provides a refundable tax credit for the purchase
  of health insurance
• Allows purchase of individual policies across
  state lines
• Allows employees to elect to receive health
  benefits in the form of cash

68
Closing Thoughts

• Comprehensive reform remains a difficult
  proposition
• Federal reform will be a focus of the 2008
  general election, and the following Congressional
  session
• States continue to move ahead on their own as the
  laboratories of democracy

69
Questions?

• jgoldberg_at_naic.org